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DAX Rebounds After Rough Week

The DAX index has started the week with gains in the Monday session. Currently, the index is trading at 12,303.00, up 1.63% since Friday’s close. On the release front, there are no German or Eurozone indicators on the schedule.

Global stock markets were turbulent last week, and the DAX suffered sharp losses of 4.6%. US markets ended the week with gains, and Asian and European markets have followed suit on Monday. On Thursday, the DAX dropped to its lowest level since early September. It’s been a rough February for the stock markets, and the DAX has shed 7.6% since the start of the month. Is the correction over? It’s too early too tell, since much of the sell-off is related to investor concerns over possible interest rate hikes by major central banks. The Bank of England has said it could accelerate its pace of hikes, and the Federal Reserve could follow suit if inflation moves higher.

German President Angela Merkel has reached an agreement with the socialist SDP to form a new government, but the price was steep, as the SDP extracted major concessions from Merkel, notably control of the powerful finance ministry. This will likely mark a shift in Germany’s eurozone policy, which had been marked by a conservative stance under former finance minister Wolfgang Schaeuble. The weaker members of the eurozone, such as Greece, will likely find a more sympathetic ear for financial help from the SDP than they did from Schauble. Many conservatives fear that the Olaf Scholz, who is expected to become finance minster, will not be as fiscally responsible as Schaeuble. On the weekend Scholz said that Germany should not dictate economic policies to other eurozone members. The coalition agreement still requires the consent of a majority of the 464,000 members of the SDP, and if the deal is rejected, Germany will likely be headed to new elections.

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